A Year in Life of the Internet
S A N F R A N C I S C O, Dec. 27, 2000 -- The dot-com fairy tale turned into amacabre farce this year as one e-commerce company after anotherflopped and business bystanders clucked about the stupidity of itall.
But it wasn’t so long ago that plenty of smart people thoughtselling dog food, plush sofas and barbecue grills over the Internetwere good ideas.
Today’s prevailing consensus about the absurdity of thesee-commerce concepts illustrates how much the dot-com landscape haschanged in the past 12 months. The Young Turks of the New Economy,once hailed as inspired visionaries, now widely are derided asshortsighted buffoons.
“There always have been dumb ideas in business, but you don’tusually see so many of them at one time,” said Philip Kaplan, whoruns a Web site with a profane name that features a satiricaldot-com dead pool for Internet failures.
It’s All Academic With These Guys
Marc Benioff, a former Oracle Corp. executive who is chairman ofSan Francisco-based Salesforce.com, said he couldn’t believe someof the business decisions made at other dot-com companies duringthe year.
“A lot of these guys were writing Harvard Business School casestudies, but they weren’t writing them on how to build abusiness,” Benioff said. “They were writing them on how to torcha business.”
Amid all the dot-com detritus, a few clever — and evenpotentially revolutionary — ideas emerged during 2000, too.
Here, then, is a look at some of the year’s dot-com duds anddelights:
Not Ready for Prime Time
Super Bowl XXXIV was billed as a coming-out party for the 13dot-com companies that shelled out an average of $2.2 million for30-second commercials aired during the game.
The ads were plenty slick, but they didn’t accomplish much — they mostly attracted customers who discovered that the featuredsites were more about style than substance.
“A lot of these companies forgot that good advertising onlymakes a bad product fail faster,” said Clark Wood, vice presidentof marketing for AutoTrader.com, one of the few e-commerce SuperBowl advertisers that didn’t regret spending all that money.
At least two of the Super Bowl dot-com advertisers — Pets.comand Epidemic.com — have since closed their doors and several othersare struggling to survive.
Stupid Pet Tricks
Online pet stores seemed to multiply faster than rabbits untilfickle financial markets performed their form of euthanasia.
When the year began, there were five major online pet e-tailers— Pets.com, Petstore.com, Petopia.com, Petsmart.com andPetPlanet.com. Together, they raised roughly $400 million fromventure capitalists and the stock market.
As the year ends, just two of the original five, Petopia.com andPetsmart.com, are still peddling dog food over the Internet.
If it weren’t for all those stupid pet tricks, online furniturestores might have been e-tailing’s biggest debacle of the year.
As it was, three high-profile furniture e-tailers — UrbanDesign.com, Living.com and Furniture.com — wound up taking abench seat this year. Turns out most people want to sit on a sofaor recliner before they buy it. And apparently someone forgotshipping all that heavy stuff to people’s homes costs a whole lotof money.
World’s Leading Breakfast Cereal Portal
AllAdvantage.com was financially disadvantaged from the get-go.The Hayward, Calif.-based company built its entire business aroundthe idea of paying its members to surf the Web. The companypromised to pay anyone 53 cents per surfing hour as long as theyused an AllAdvantage browser that kept an advertising bar on theirscreen at all times.
It didn’t quite work out the way that AllAdvantage envisioned.The company budgeted for just 30,000 members in its first fourmonths. Instead, millions signed up for the service, costingAllAdvantage $33 million in its first three months alone.
Last month, AllAdvantage laid off 35 percent of its work force — about 150 employees — and promised to develop a new businessstrategy.
Then there was San Francisco-based BBQ.com, which thought itcould cook up an online business from the $18 billion per yearindustry for barbecue grills and all their fixings. The company gotskewered instead.
And Flake.com sounded like a plot out of an old Seinfeldepisode. The site aimed to become the world’s leading breakfastcereal portal. In June, it became a site about nothing.
A Breakthrough in E-commerce
PayPal.com, a fast-growing online payment network, may emerge asthe year’s most significant breakthrough in e-commerce. The PaloAlto, Calif.-based service and its holding company, X.com, allowmerchants and consumers to set up online financial accounts andthen send digital cash payments through e-mail.
Founded by Peter Thiel and Elon Musk in late 1999, PayPal openedmore than 5 million online accounts this year and is adding about600,000 new members each month.
Now comes the hard part: making money. After offering theservice for free at first, PayPal began imposing a service fee onits heaviest users.
In another sign of how a simple idea can turn into something bigon the Internet, iWon.com established itself as one of the Web’smost popular destinations with a familiar promotion: a sweepstakes.The site offers cash prizes to its visitors every day. The morefrequently that surfers click on iWon’s site, the better chancethey have of winning.
The result: iWon boasts one of the Web’s most loyalconstituencies — precisely the kind of traffic that appeals to theadvertisers that ultimately pay iWon’s bills.
The Irvington, N.Y.-based site’s sweepstakes system, conceivedby co-founders Bill Daugherty and Jonas Steinman, isn’t cheap, butit’s not as expensive as it might look.
The company awards $27 million in prizes per year, including a$1 million monthly prize and a $10 million jackpot on Tax Day, butbecause the money is paid out over 25 years, iWon actually spendsabout $17 million annually.
IWon’s pockets are deep. It has raised $205 million so far andits investors include media giant Viacom Inc., which owns aboutone-third of the business.